SINGAPORE - The banking sector's outlook will be "very tough" in the coming one to two years, UOB chairman emeritus Wee Cho Yaw has cautioned.

Mr Wee made this comment on Thursday (Apr 20) during UOB's annual general meeting, with around 500 shareholders in attendance. He said that the sector did not do well last year, including banks in the United States and in China.

That's why UOB should stay "conservative", the 88-year-old added, as an aggressive approach may hit the bank's earnings.

UOB saw its full-year net profit drop from S$3.22 billion in 2015 to S$3.11 billion last year.

The decline was due partly to major provisions forked out by the bank for its non-performing loans exposure to the struggling oil and gas sector - an issue faced also by DBS and OCBC.

Chief executive Wee Ee Cheong assured a worried shareholder that new NPL (nonperforming loan) formation had likely peaked last year, and provisions should "normalise downward" this year. He added that oil and gas loans account for just 5 per cent of UOB's loan book.

Mortgage loans quality on the book is also stable, Mr Wee told another shareholder, as 75 per cent of the loans are to owner-occupied properties.

Stress tests showed that even if asset prices drop 30 per cent, the bank can still break even, chief risk officer Chan Kok Seong said.

All 10 resolutions were passed at the AGM, including approval for higher directors' fee, which rose due to an enlarged board.

Mr Wong Meng Meng, 68, stepped down from the board after 17 years.

He noted that the banking business model is at a crossroad as it seeks growth in the digital world.